PayPal is being sued by the founder of venture capital firm Andav Capital, who claims she was excluded from the payments giant’s diversity and equity program because she is Asian, according to a lawsuit filed this week.
In 2020, PayPal made a $530 million commitment to support more Black and minority-led businesses in the wake of Black Lives Matter. Nisha Desai, the founder of Andav Capital, claims in the newly filed lawsuit that she applied to be considered for the financial commitment but was overlooked because she is Asian, as the program was intended to focus exclusively on black and Hispanic-led ventures .
Desai launched Andav Capital in 2018, according to Pitchbook, to invest in early-stage companies. The venture firm has made at least 13 investments, including in fintech startup Acorns, startup marketplace IFundWomen and environmental tech firm Kubik.
“Funds owned by individuals of other races, including Asian-Americans, are not considered equal,” Desai claims in the lawsuit filed in a New York federal court. “Worse, PayPal and its senior management have repeatedly trumpeted the program’s focus on race, boasting in statements and press releases that PayPal’s program is for some races and ethnicities and not for others.”
When reached by TechCrunch, PayPal spokesperson Taylor Watson declined to comment on the case, citing pending litigation.
In her lawsuit, Desai claims she met multiple times with executives at PayPal and its venture arm, PayPal Ventures, about her qualifications for a grant, where Desai claims she headed public policy and research. of PayPal explicitly told her in a July 2020 meeting that the program prefers firms led by blacks and Hispanics “over other races and ethnicities, including Americans Asian”.
When PayPal announced its first investments from the $530 million commitment, the company invested in firms with at least one black or Latino general partner, “an unmistakable racial pattern that reflected PayPal’s stated intent based on race,” the statement said. lawsuit
“Even today, PayPal continues to make the same race-based claims,” the lawsuit adds. “In total, PayPal invested $100 million in 19 venture capital firms led by ‘black and Latino managers,’ but announced not $1 in funding for funds led by Asian-American women – despite their demonstrated interest and suitability . (…) For PayPal and its executives, Asian Americans may be a minority, but they are the wrong kind of minority. PayPal has not announced the end of the program.”
Desai claims her rejection of PayPal’s investment commitment cost her firm “millions of dollars worth of life capital.” The lawsuit also alleges that those who received PayPal checks were “able to use those prizes toward additional investment, greater brand equity, resources, access and success.”
Meanwhile, funds like Desai’s that were rejected “suffered from the negative and inaccurate perception that PayPal had made a decision based on the merits of their business, rather than the fund’s ownership race,” the lawsuit alleges.
Desai alleges that PayPal violated the Civil Rights Act of 1981 and that PayPal’s “racially exclusionary investment program” is illegal under New York state and city laws prohibiting racial discrimination.
Desai is represented by Consovoy McCarthy, a conservative law firm with a history of taking on cases related to race-based programs. The law firm specifically sued Pfizer over its diversity program, which targeted blacks, Latinos, and Native Americans, alleging that the program discriminated against white and Asian American applicants, though the lawsuit was later dismissed. Consovoy McCarthy also sued Harvard University and the University of North Carolina in 2022 over race-based admissions that later helped overturn affirmative action in education.
Desai did not respond to TechCrunch’s request for comment on Friday. In a brief statement shared with TechCrunch, Consovoy McCarthy partner Patrick Strawbridge said: “PayPal discriminated against Ms. Desai based on her race. This discrimination is against our laws and the very spirit of the supposed purpose of the PayPal program. PayPal was a market leader and others followed suit, despite Ms. Desai’s pleas to be treated fairly. We look forward to trying her case and getting justice in court.”
Desai joins other individuals and organizations suing diversity schemes to target only black and Hispanic communities. Most notably, Edward Blum, the man who helped overturn affirmative action in education along with Consovoy McCarthy, created the American Alliance for Equal Rights (AAER), which went on to sue the venture firm Fearless Fund, alleging that a of its grants had discriminated against whites and Asian Americans because it was given only to black women.
That lawsuit was settled, but many other lawsuits have since followed.
Sean O’Kane contributed reporting.
Updated with commentary by Consovoy McCarthy.
